Europe is currently grappling with a second wave of Covid-19. Economies across the world have encountered significant upheaval as a result of the pandemic; and with evidence clearly showing that embedding sustainability can lessen the costs of shocks, whether these be health epidemics to recessions and trade wars, we believe that countries need to heed this advice and recalibrate their economies, starting with a sustainable recovery and protecting themselves against future shock.
While we cannot yet fully comprehend the economic implications of the Covid-19 crisis, it is undeniable that the pandemic has significantly affected global economies, governments, businesses and society, as well as our natural environment. When it comes to developing a strategy for recovery from such a complex challenge, there is no straightforward solution. Going beyond the limits of conventional recovery, our recovery from the Covid-19 pandemic must take a more considered approach – namely, in the form of recalibrated recovery.
Although a conventional recovery focuses on key existing priorities such as health, finance and economics, a recalibrated recovery focuses on incentivising innovation pursuant to new priorities, including factors such as equality, inclusivity, sustainability, liveability and natural capital. Furthermore, a conventional recovery thinks in terms of stabilisation in the short to medium term, whereas recalibrated policy is based on long-term planning, in the attempt to create resilient recovery and growth. Most importantly however, recalibrated recovery accepts and understands that climate change is accelerating and looms as a spectre as serious and economically debilitating as Covid-19, and crucially, over a longer time period, therefore needs to be urgently addressed.
Veering towards conventionally focused recoveries
Since the first lockdown, most governments have promised to invest in a recalibrated ‘green and just’ recovery, taking all aspects of economic, social and environmental sustainability into account. However, many of these political promises from governments worldwide have seemingly been met with limited success. In fact, research by Oxford University demonstrates an overestimation of the sustainability element in these recovery packages, with many in fact simply following the road towards conventional recovery.
Unfortunately, such an approach risks the resilience of economies globally. It exacerbates existing inequalities and mortgages irreplaceable natural capital, eroding the very foundations of sustainable development. We have already seen these warning signs from the first lockdown, now governments and industry leaders must take heed, considering how it has impacted economic, social and environmental issues, and integrate this learning into subsequent lockdowns.
Developing new decision frameworks
Massive government interventions during the crisis phase are necessary but cannot be sustained. The value-for-money, efficiency and future-proof of these investment decisions should be tested and learnt from.
The UK government is learning from experience in several countries using ‘sovereign green bonds’ or ‘green gilts’ to fund low-carbon infrastructure. Indeed, the Chancellor recently announced the launch of the UK’s first ever Sovereign Green Bond, making it the first country in the world to make TCFD disclosures mandatory – a step we welcome in positioning the UK as a leading nation in green finance.
By adopting a new approach, governments can fulfil their promises and lock-in genuine resilience. Ultimately, this means addressing today’s imminent challenges (i.e. the Covid-19 pandemic), but also the challenges of the future. To do this, decision frameworks that conspicuously embed sustainability must be expanded to include Covid-19, as well as other potential external shocks, and the amplified impact of climate change. In this way, holistic sustainable policies are promoted, encompassing sustainable recovery with climate change issues, such as decarbonisation and the road to net-zero.
Shifting this approach to focus on building a sustainable society for all, including future generations, will see frameworks and systems built with resilience in mind, enabling the gradual restructuring of our economies to absorb shock. But in tandem with this, there are practical steps that need to be taken now.
Reframed investment vehicles and partnerships
In the UK specifically, there are a number of steps than can be taken to embed sustainability in our economy and society, including:
1. Greener investment vehicles.
It is vital that we adapt existing investment vehicles to favour low-carbon, sustainable recovery and future shock absorption. Investment can be better aligned with sustainability, encouraging positive and resilient economic development. Additionally, the way in which goods and services are procured will play a vital catalytic role, providing cities and local authorities with a key part in the process of achieving sustainability.
2. Greener decisions.
Support to public decision-making across local government in the UK, building on the HM Treasury’s approaches to sustainable decision making. By updating the HM Treasury green book to include new integrated solutions, transparent trade-offs, new risk and opportunity values for Covid-19 and other health inequalities can be ensured.
3. Effective Partnerships.
Beyond adapting existing investment vehicles, forging new partnerships between industry and government will also allow our economies to become more resilient in the face of external shock. One such example is the collaboration of Scottish Water Horizons and Stirling Council to develop the innovative Stirling Heat Network – creating a partnership to utilise waste heat from sewage to generate energy. Cross-industry collaborations, supported by science-based targets and government frameworks, can help us to foster resilience when developing new standards, as well as during their actual implementation. It is also vital to create a dialogue with all stakeholders, from policy-makers and organisations to trade unions and citizens, throughout the process. After all, the climate challenge is a global issue, that requires truly global collaboration.
Agile systems with resilience to shocks
As the Covid-19 pandemic has demonstrated, shocks to our society may come in any form, and at any time. In fact, tomorrow, another shock may come. Yet, by building in agile systems and approaches, supported by investment and implementation, we can futureproof our society, making it resilient to any future shocks. No man is an island, and by working together to create a new social and economic contract that works for entire communities, we can truly move forward and create a sustainable society.